re: bulletin article neo retirement plan Paper, rock, oil...

re: bulletin article neo retirement plan Paper, rock, oil
07/09/2005




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An Australian company with oil prospects in California may be worth a short-price share grab, writes David Haselhurst.

Not many of the junior petroleum explorers can boast complete success from multi-well drilling in their first year. Nuenco NL (ASX code NEO) can make this claim, along with expectations of ­payable production before the end of this calendar year.
While it’s too early to shout “bonanza” and rush the stock, it has attractions as a low-priced counter with attractive upside potential. Low-priced paper is an ­affordable way to get quantity. With that, one hopes to get better leverage to ­percentage gains in the market price as positive news emerges from field activities.

Nuenco’s Perth-based managing director Anthony Kain on his way home from California last week visited Sydney to spruik the stock at investor presentations. The share price remained fairly stable over the week, however, with trades between 3.8¢ and 4¢.

Nuenco was born out of the reconstruction of Anzoil NL in mid-2004. It involved a shower of new paper, including 100 million shares issued at 2¢ to fund the company’s initial entry into various joint ventures in California involving the Australian-listed Orchard Petroleum.

Nuenco holds a 37.5% interest in several thousand hectares of tenements in the San Joaquin basin of southern California. It is believed to host an extension of the rich Lost Hills oilfields discovered early last century.

Since joining the project last September, the Nuenco consortium has drilled two successful discovery wells and four successful appraisal wells, all aimed at establishing shallow gas production. Test wells have flowed at rates up to 1.5 million cubic feet a day from the Jack Hamar 3-13. A large-capacity pipeline is being built to connect to a major grid owned by Shell-Exxon-Mobil west of the new field discovery.


Nuenco’s share in the pipeline will cost about $US400,000 ($525,000), says Kain. The pipeline should be feeding into the grid at a gross sales price of between $US6 and $US10/1000 cu ft in a couple of months. Expectations are that the gas price could rise to as high as $US10/1000 cu ft in ­California this year, such is the demand from electricity generators. Another nine to 12 production wells are planned for this shallow zone field before the consortium moves on to test deeper gas and oil targets.

At June 30, Nuenco had 481.71 ­million issued shares, which have traded between 5.9¢ and 2.3¢ in the past year. At 4¢, ­market capitalisation was $20m, with net cash at June 30 of $1.36m. The ­company also had 289.6 million listed options ­exercisable at 5¢ by February 16, 2006. Last month, Nuenco placed 34.3 million shares at 3.5¢ each (plus an equal number of 6¢ options expiring in December 2007), to London investors to raise $1.3m.

After paying for its share of the pipeline and other expenses, it now has around $1.5m in cash. We’ll watch for an off day for the oil specs and hope to pick up a parcel under 4¢ as a punt against the excellent likelihood of more good news.